A recent article by Santiago Carbó in the Spanish daily El Pais warns that the housing market recovery is patchy, and that the sector still lacks some fundamental virtues taken for granted in other countries.
Adaptation and translation of an article published by El Pais.
The real estate sector is tainted by the stigma of the crisis: Speculation, corruption, excess, menial jobs… all with negative connotations for an industry that Spain still depends on to a great extent. For example, out of the 90,909 jobs created in February, construction accounted for the biggest share (26,068). But the industry’s constant bleating that Spain cannot grow without construction is disagreeable. The sector’s contribution should be organic, in line with the requirements of demand, and with a new system of incentives in place, as the one that lead to disaster in recent years has barely changed.
To establish the necessary transparency and control, the first thing needed is reliable house price statistics on a par with those in the US or UK, based on actual sales. In Spain, we have to put up with a statistical mishmash including valuations (Ministry of Development) and public registries (Spanish Statistics Institute/INE). As just about everyone who has bought a property knows, neither the valuation price nor the registered price tend to be the one paid.
Nevertheless, it seems undeniable that property prices have bottomed out after peaking in the third quarter of 2008. The latest figures published by the INE suggest that in the last quarter of 2014 prices increased by 1.8 per cent year-on-year. In Spain, the peak-to-trough price drop of between 35 and 40 per cent has taken over six years. In other countries, such as Ireland, a similar adjustment took less than two years. Home buyers, banks, and developers have had to swallow a bitter pill in small doses, lethal in some cases. A return to financial normality, and the Sareb’s necessary influence on prices and the market were important steps to help the adjustment along.
The real estate market is currently picking up somewhat, albeit from very low levels. Although property sales went up 9.6 per cent in January 2015, INE data also suggests that in December 2014 there were 15,962 new mortgages compared to 25,998 properties sold. Cash transactions – clearly out of most people’s reach – continue to be very important.
The property market recovery underway is at once slow, necessary, conveniently moderate, and profoundly uneven. In places like Madrid, or the Valencian Community, annual price rises are already approaching 3 per cent, while in others such as Navarra, price drops are over 4 per cent. In spite of the adjustment, the average new home with 90 square metres in Spain still costs 6.1 x the annual salary. And this is over double in the Balearics (8.8 x salary) than in Castilla-La Mancha (4.1 x salaries). For many Spaniards, property is still a luxury item, even more so with the current high unemployment. Furthermore, the reality is even harsher because, as has been revealed in recent days, repossessions went up by 9.2 per cent in 2014. And two thirds of the repossessions come from mortgages approved between 2005 and 2008, particularly crazy years.
There are still over half a million new properties on the market that have never been sold, and the supply is probably double this when you add resale properties. It’s obvious that the adjustment still has a long way to run, regardless of the latest change in the average price.
Spanish Property Insight adapts and translates selected articles from the local press for the benefit of non-Spanish speakers.
This translation is based on the following article (in Spanish): Vivienda: regreso desigual